The Dirt: Teranet on a roll with legal, business successes

While the holidays are now over, Christmas seemed to have come early to Teranet Inc., the owner and operator of Teraview, Ontario’s electronic land registration software system.

A subsidiary of Borealis Infrastructure, which in turn is an arm of the Ontario Municipal Employees Retirement System, Teranet last hit the headlines when it secured a renewed monopoly with the province of Ontario at the end of 2010 for the administration of the electronic land registration service for another 50 years. With almost six million real property parcels already digitized and electronically registered in Ontario, Teranet then set its sights outwards for new lands to digitally conquer and register.

As its first such conquest after securing the monopoly, Teranet recently announced it had won the exclusive rights to the property registration system for the province of Manitoba. In a 30-year deal said to be worth $75 million upfront to the province, Teranet expects to earn royalties of approximately $11 million in 2013, a number projected to increase to $24 million by 2043 when the licensing exclusivity ends.

According to the CBC’s coverage of the pre-Christmas press conference with Teranet president and CEO Jay Forbes and Manitoba Finance Minister Stan Struthers, Teranet would be investing more than $35 million in systems, software development, and upgrades while the provincial government maintains the authority to set rates paid from time to time by customers for land registration services. As part of the agreement, up to 140 provincial government employees will transfer to Teranet and all property registry offices will, at least for the time being, remain open.

Of course, if Ontario is any example, the likelihood of local registry offices remaining open for any prolonged period after the implementation of the Teraview infrastructure is low. There are simply no more land registry offices in the province of Ontario, at least in the traditional sense, and there’s an entire generation of real estate solicitors here who are growing up without the benefit of them.
 
This isn’t necessarily a bad thing. The reality is that once the digitization of existing records and the conversion of current titles are complete, a bricks-and-mortar repository for real estate records in each county or judicial district is simply redundant. Of course, access remains an issue of vital importance to practitioners, here in Ontario and no doubt in Manitoba as well, and the challenge lies in providing it in an effective manner that’s as good, if not better, than the support that would have been available with administrative staff at the local land registry office standing behind a countertop during working hours. Time will tell in both provinces.

As if the Manitoba deal wasn’t enough to fill Teranet’s stockings, the company received another gift in time for Christmas, this one from the Ontario Superior Court of Justice. Teranet had been the subject of a lawsuit from its own surveyors in a $50-million class action proceeding, Keatley Surveying Ltd. v. Teranet Inc.

In its claim, Keatley brought suit for and on behalf of all Ontario land surveyors for copyright  infringement under the federal Copyright Act for all of the drawings as well as the reference, subdivision, and condominium plans stored in Teraview (and in a similar Teranet data access portal called GeoWarehouse that would likely be popular with real estate agents, planners, and municipalities) for which Teranet charged a fee for retrieval and transmission. The claim was based in large part on a fairly recent High Court of Australia decision in Copyright Agency Ltd. v. State of New South Wales that provided some copyright protection for Australian surveyors under certain circumstances under the comparable Australian legislation.

Teranet’s Eric Black confirms that the Ontario Superior Court released its decision almost the same day as the announcement of the Manitoba deal and notes the ruling resoundingly rejected the certification of the class under the Class Proceedings Act.

In an extremely detailed and well-written decision, the court rejected certification of the class due to concerns over a “merits-based class definition.” In other words, to be a class member, a surveyor had to be a “holder of copyright” in a plan of survey that was in Teranet’s system, but the underlying issue of the litigation was whether or not any such surveyor did in fact “hold the copyright” in such plans and drawings.

“The law is clear that a class must be defined without elements that require a determination of the merits of the claim. . . . Membership in Keatley’s proposed class definition depends on the outcome of the very issue in dispute at the heart of this action,” wrote Justice Carolyn Horkins.

I’m not aware of any appeal in progress, but even if the decision isn’t appealed, I should note that the failure of the plaintiff surveyor to certify the claim as a class proceeding is only an interlocutory step and doesn’t actually end the litigation risk per se. That said, as is the case with all of these sorts of claims, the failure to certify as a class proceeding is a material and practical impediment to plaintiff recovery. As such, there was no doubt a long and palpable collective sigh of relief at the Teranet offices after the release of the decision.

Christmas did indeed come early to Teranet. 


Jeffrey W. Lem is a partner in the real estate group at Miller Thomson LLP. His e-mail address is [email protected].

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